New Loan Management System to Unlock Rural Loans in Rwanda
The international development organization ICCO (part of Cordaid), the Dutch-based software company Simbuka, the Rabo Foundation, De Lage Landen (DLL) and microfinance institution (MFI) Inkunga Finance Plc in Rwanda have developed and implemented a software solution that will help to manage Inkunga’s loans.
The partnership helps Inkunga to implement an affordable and appropriate loan management system to reduce the operational costs and decrease the credit risks for the MFI, while improving the confidence to invest in agricultural- and other micro financing. The multi-tenancy SaaS (Software-As-A-Service) architecture of Simbuka enables low-cost deployment and easy implementation. These cost savings were passed onto Inkunga, where the enhanced Simbuka system was first deployed and then to all future customers. The partnership is expected to lead to an increased volume of rural loans, benefitting smallholder farmers in Rwanda. It is expected that two other MFIs (Clecam Ejo Heza and Umutanguha) in Rwanda will follow later in 2021.
“In the past, data collected by MFIs was neither digitized nor consolidated for future use. Data remained on paper, scattered in individual physical loan files or computers. Aside from not being able to update the Agricultural-Credit Assessment Tool (A-CAT) the MFIs were also losing precious information from the past years that would allow them to compare and benchmark among the different crops, seasons, loan amounts, years, etc. Thus, the MFIs would need to integrate A-CAT information into the core banking system or consolidate this information manually for a better use of A-CAT,” states Victoire Umutesi, ICCO (part of Cordaid) Microfinance Advisor in Rwanda.
The partnership resulted in the integration of A-CAT into Simbuka’s loan origination software and incorporating the credit underwriting and credit scoring expertise provided by DLL into the Simbuka software. By the end of March 2021, loan officers from Inkunga were trained to do loan assessments on the platform. This eases the efforts for the farmers, for loan officers and gives the MFIs a track record on their rural clients, thus reducing risk and saving time.
“I’m one of Inkunga’s loan officers who was trained to use this new software application, which we call Simbuka Plus. This system will help us store information about our customers who apply for loans. It will reduce the time we spend on one application starting from application to approval. It will also reduce mistakes in the loan application process,” says Nshimyimana Jean Paul, loan officer at Inkunga.
The partnership agreement is part of a larger effort from ICCO’s STARS program to support MFIs to professionalize their services towards smallholder farmers. Last year, the partners signed an agreement to further digitalize ICCO’s A-CAT which helps MFIs and banks to develop tailor-made loans that specifically fit the needs of clients in rural communities across Africa. The tool estimates the expected investment needed to finance inputs and other farm-costs, as well as estimate the total net income from agricultural activities based on estimated crop yields. Based on the expected results, MFI staff can know the optimal loan size for the particular farmer and reduce credit risk.